As part of the legislative process, the Congressional Budget Office supplies the Congress with cost estimates for legislation, economic and budget projections, and other economic assessments. Information from the research community is an important element of CBO’s analyses. This is the eighth in a series of blog posts discussing research that would enhance the quality of the information that CBO uses in its work. (Earlier posts in the series discussed the need for new research in the areas of energy and the environment, finance, health, labor, macroeconomics, national security, and taxes and transfers.) Please send comments to firstname.lastname@example.org.
CBO regularly provides the Congress with information about the effects of preventive medical care on the federal budget (CBO 2020). Over the past decade, the agency has tracked different approaches to reducing obesity rates and the resulting effects on health and health care spending (for example, CBO 2015). CBO continues to work on that topic, but there are significant gaps in the relevant research literature. The agency is on the lookout for new research that would enhance its analysis of policies affecting the use of obesity treatments—especially research on the use of anti-obesity medications (AOMs).
The developing market for AOMs could significantly affect health care spending and the federal budget. The most recent available data show that spending on AOMs has increased markedly. CBO has not yet produced a cost estimate for legislation that would expand access to those medications for beneficiaries of government programs such as Medicare, but the agency is monitoring trends in the use of AOMs, along with their prices, effects on health, and coverage by insurance plans. When CBO analyzes such legislation, it will consider the potential offsetting budgetary savings associated with improved health outcomes as well as the direct costs of the medications. (Lawmakers would almost surely take additional considerations into account, including benefits to patients not measured in terms of budgetary costs.)
What Are Recent Trends in the Availability and Use of Anti-obesity Medications?
New AOMs belong to a class of drugs called glucagon-like peptide-1 (GLP-1) agonists, which were originally developed to treat diabetes. Currently, the best-selling GLP-1 agonist is semaglutide. It is marketed as a diabetes treatment under the trade names Ozempic and Rybelsus, and as a treatment for obesity under the trade name Wegovy. (Ozempic and Wegovy are administered by subcutaneous injection; Rybelsus is taken orally.) Other AOMs are being developed and tested.
In the second quarter of 2023, net sales of AOMs in the United States amounted to $1.1 billion, which was 65 percent higher than in the previous quarter and more than triple sales in the quarter before that (SSR Health 2023). Net U.S. sales of semaglutide (including Ozempic, Rybelsus, and Wegovy) in the second quarter of 2023 amounted to $3.4 billion. Net sales of all GLP-1 agonists, which include other drugs known to reduce obesity, totaled $5.9 billion during that same period.
In a randomized two-year study, a group comprising a mix of overweight and obese patients assigned to receive semaglutide lost 15 percent of their body weight, on average, whereas a similar group assigned to receive a placebo lost 3 percent of their body weight, on average (Garvey et al. 2022). Eighty-seven percent of the patients assigned to receive semaglutide used it for the full two years, and, on average, their weight loss persisted throughout the period. Patients taking semaglutide have also experienced improved cardiovascular health (Wilding et al. 2021, Ryan et al. 2020).
How Would Medicare’s Coverage of Anti-obesity Medications Affect the Federal Budget?
The second-largest federal program, Medicare provides subsidized medical insurance for people age 65 or older and for younger people with long-term disabilities or end-stage renal disease. Under current law, Medicare is statutorily prohibited from covering drugs when they are used for weight loss, including AOMs. (GLP-1 agonists are covered for the treatment of diabetes but not for the treatment of obesity.)
Members of Congress have introduced legislation, most recently the Treat and Reduce Obesity Act of 2023 (H.R. 4818 and S. 2407), that would allow Medicare to cover AOMs. CBO expects that such coverage would result in greater use of AOMs by Medicare enrollees. The budgetary effect of that increased use would depend on the prices of those drugs as well as any effect of that use on other health care spending. In CBO’s assessment, Medicare’s coverage of AOMs at their current prices (accounting for rebates and discounts) would increase overall federal spending.
Costs of Anti-obesity Medications
As of September 2023, the list price for a four-week supply of injectable semaglutide is $1,349. The amount received by the manufacturer is usually reduced by discounts it pays to insurance plans and other payers. If the drug was covered by Medicare as an AOM, some of its cost would be paid by the program’s enrollees through higher premiums and cost-sharing. But even after accounting for those effects, CBO expects that the drug’s net cost to the Medicare program would be significant over the next 10 years.
The potential for price negotiation and for the emergence of new drugs makes the future price trajectory of AOMs highly uncertain. CBO expects semaglutide to be selected for price negotiation by the Secretary of Health and Human Services within the next few years, which would lower its price. Unexpectedly lower prices for treatment with a given effectiveness would improve the trade-off between the cost of AOMs and any health-related savings and would also reduce the incentive to develop new treatments. New AOMs are also expected to become available during that period. The new drugs might be more effective, have fewer side effects, or be taken less frequently or more easily than current medications. Those improvements could translate to higher prices for AOMs in the future, even if prices decline for drugs that exist today.
Effects on Other Health Care Spending
Greater use of AOMs by people with obesity (and who are not diabetic) could improve their health, reduce the use of other health care products and services, and lower federal spending for other types of health care. Patients experiencing sustained weight loss could, for example, require less federal spending on cardiac care. The overall budgetary effect would depend on how the potential savings compare with the cost of the medications for the people who are newly using them. In making that comparison, CBO relies on the best available evidence and considers the full range of effects that using AOMs could have.
To date, the evidence suggests that the amount of potential savings on cardiac care and other health care would be less than the current net federal cost of AOMs. That is partly because federal spending on health care for people with obesity who have lost a significant amount of weight has not fallen substantially, despite the health benefits they experienced. Thus, CBO expects that at their current prices, AOMs would cost the federal government more than it would save from reducing other health care spending—which would lead to an overall increase in the deficit over the next 10 years. That could change in later decades, depending on the future prices of AOMs and their longer-term effects on the use of other health care products and services. Most approvals of AOMs for treating obesity occurred within the past few years, so little is known about those longer-term effects.
If researchers developed methods to reliably identify cases in which the use of AOMs would substantially lower health care costs in addition to improving health, then policymakers could specify that Medicare cover the drugs in only those cases. Such a policy that targeted an expansion of AOM coverage would result in less federal spending than a policy that broadly authorized coverage of AOMs—though it would be challenging to implement.
One type of evidence that CBO has examined comes from simulation models used to estimate the amount of spending on AOMs that would be offset by the reduction in spending on other types of health care as a result of the drugs’ use. One study found that compared with modifying one’s lifestyle, using semaglutide increased overall spending on health care (Atlas et al. 2022). Estimated reductions in nondrug costs amounted to about one-fifth of the cost of the drug (see Table 4.5 in that study). Another study reported that using AOMs resulted in savings for the Medicare program, but the analysis did not incorporate the direct cost of the medication; therefore, the results do not represent the full impact of the drugs’ use on the federal budget (Ward et al. 2023).
CBO is not aware of empirical evidence that directly links the use of AOMs or other weight-loss treatments to reductions in other health care spending. One unpublished study of medical claims conducted by a pharmacy benefit manager found that in the first year after treatment began, the use of AOMs was associated with an increase in the total cost of care roughly equal to the cost of the AOMs (Leach et al. 2023). Research on the effects of bariatric surgery on other health care costs generally does not show reductions in such costs, even when patients who were obese or overweight maintain weight loss for many years (Smith et al. 2019, Weiner et al. 2013, Neovius et al. 2012).
What New Research Would Be Especially Useful?
CBO will keep abreast of information about AOMs as it prepares analyses for the Congress. New research on factors affecting their use, such as take-up rates, patients’ adherence to drugs currently on the market, and expectations about the prices and effectiveness of AOMs that are being developed, would be especially valuable in that work. Research on near- and long-term clinical impacts of AOMs (including health benefits or complications associated with them) and their effects on patients’ use of, and spending on, other medical services would also be of particular interest.
Phillip L. Swagel is CBO’s Director. This blog post includes contributions from the following CBO staff: Austin Barselau, Chad Chirico, Noelia Duchovny, Sean Dunbar, Tamara Hayford, Jeffrey Kling, Jared Maeda, Sarah Masi, Asha Saavoss, Robert Sunshine, Chapin White, Katie Zhang, and Noah Zwiefel.